Lawsuit Over Divorce Case Proceeds Against Phillips Nizer
A Manhattan judge has refused to dismiss a legal malpractice suit against Phillips Nizer that alleges the firm failed to share information provided to an inexperienced attorney in a divorce case that would have altered litigation strategy.
Acting Supreme Court Justice Nancy Bannon said the firm’s former client, Elizabeth Berardi, has shown she has causes of action to recover for legal malpractice and negligent supervision and for a judgment declaring that the firm overbilled her by virtue of alleged malpractice.
The parties now will continue with discovery in Berardi v. Phillips Nizer, 157690/2012.
Phillips Nizer partner George Berger, who represents the 70-attorney firm, said they are contemplating an appeal. “We don’t feel the judge dealt with the majority of the firm’s arguments on the merits,” he said in an interview Monday.
Berardi retained Phillips Nizer in 2000 in drafting and negotiating a postnuptial agreement with her then-husband, Eugene Berardi, who owned interest in several bus companies, including Adirondack Transit Lines and Pine-Hill Kingston Bus Corp.
The agreement provided that, in the event of a divorce, she would be entitled to a 49 percent interest in closely held corporations and a limited liability company in which he held a majority interest. Eugene Berardi would have an interest in the other 51 percent.
The agreement, signed in December 2000, did not specify whether Elizabeth would or could sell her interests to the husband or to others, or whether she would simply continue to hold the interests as a minority shareholder.
Less than five years later, Elizabeth Berardi retained Phillips Nizer to handle her divorce proceedings. According to court papers, the firm arranged to have then-litigation partner Helen Davis Chaitman, who allegedly had no matrimonial experience, serve as the principal attorney. Partner Elliot Wiener, who is also a defendant in the malpractice suit, was the senior matrimonial lawyer on the case.
Eugene Berardi moved to vacate the postnuptial agreement, which Phillips Nizer opposed. The agreement was upheld in 2006 and, following a trial, the court issued a judgment in 2009.
Elizabeth Berardi discharged Phillips Nizer in April 2010. About two years later, she filed suit, asserting there were agreements made before 2000 by prior shareholders and members of the businesses that limited her ability to freely sell or trade her interest in those entities, thus diminishing their market value. She said Phillips Nizer and Wiener knew or should have known about the restrictions but failed to advise her of the effect.
In particular, she claims that Chaitman received notice of the shareholder agreements in 2005 but did not share that information with Wiener for about least two years. As a result, Berardi said, Phillips Nizer and Wiener did not have sufficient facts in responding to Eugene Berardi’s motion to set aside the postnuptial agreement.
But for Phillips Nizer’s alleged malpractice, she claims, she would have permitted the postnuptial agreement be set aside, allowing her to seek equitable distribution and placing her in a position to request a cash buyout.
She also argues Phillips Nizer had a conflict of interest in defending the postnuptial agreement that it had drafted.
In a separate claim alleging overbilling, she said 39 professionals, including 23 firm attorneys, billed for their time. The firm charged her more than $1.4 million, while her ex-husband was charged about $395,000 in legal fees, she claims.
In moving to dismiss, Phillips Nizer claimed the case is an attempt to avoid paying for legal services and is “masquerading” as a malpractice action. The firm argued the case should be dismissed because the claims are barred by the statute of limitations, contradicted by documentary evidence and legally insufficient.
The firm has filed counterclaims against Berardi, seeking $741,695 in unpaid legal fees.
Phillips Nizer submitted 99 exhibits in defense, but in her May 9 ruling, Bannon said “most of the exhibits” from the firm do not constitute documentary evidence.
“In any event, none of them conclusively refute the allegations in the complaint or establish a defense,” she said.
Addressing the statute of limitations, the judge said, Phillips Nizer failed to satisfy the burden of establishing that the claim alleging that it negligently supervised the non-matrimonial lawyer was time-barred.
Bannon’s ruling noted that Berardi’s amended complaint asserted that the non-matrimonial lawyer had possession and knowledge of the agreements at a time when that knowledge, if shared, would have altered Berardi’s litigation strategy, and due to the failure of the firm’s internal procedures, the knowledge was withheld from the lead attorney and Berardi herself.
Bannon found that the amended complaint stated a cause of action to recover damages for legal malpractice, as the allegations, if proven, satisfy all the elements of the action.
Further, Bannon found the amended complaint stated a cause of action sounding in negligent supervision, partly based on an alleged violation of §5.1 of the Rules of Professional Conduct, “which may constitute evidence of tortious misconduct.”
The judge continued the claim for a judgment, declaring that the firm overbilled.
Berardi is represented by Lee Pollock and Theresa Maguire, partners of Pollock & Maguire in White Plains.
“We believe that Phillips Nizer’s own documents will demonstrate that they pursued this minority shareholder status for her but didn’t recognize what the ramifications of that status would be, until after they achieved the result,” Maguire said in an interview Monday.
Chaitman, who is not a party in the malpractice suit, now practices at her own firm, four-attorney Chaitman LLP. She declined to comment.
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